Note ban, GST, Covid erase Rs 11.5 lakh crore

The size of informal sector was Rs 15.4 trillion in FY23, growing at an annual rate of 4.3% between FY16 and FY23.
For representational pupose (File | Reuters)
For representational pupose (File | Reuters)

MUMBAI: The cumulative impact of the GST roll-out, note-ban along with the pandemic on informal sector has been 4.3% of FY23 GDP or about Rs 11.5 trillion, shows an analysis.

As per India Ratings, the unorganised sector was severely impacted by demonetisation, GST and the covid pandemic as the number of such units shut down between 2015-16 and 2022-23 are estimated at 6.3 million, leading to Rs 11.5 trillion economic and about 16 million informal sector job losses.

The size of informal sector was Rs 15.4 trillion in FY23, growing at an annual rate of 4.3% between FY16 and FY23.

This contrasts sharply with the annual growth of 12.9% they recorded between FY11 and FY16. Had they not been hit, their size would have been Rs 26.9 trillion in FY23. This translates into a cumulative economic loss to the tune of Rs 11.5 trillion or 4.3% of FY23 GDP.

While the disastrous demonetisation was announced in November 2016, the lop-sided uniform indirect tax that GST was supposed to be was from July 2o17 and the pandemic wreaked havoc from April 2022 through October 2021.

But this period coincided with the rise in formalisation of the economy, which has resulted in robust tax collections, says Sunil Kumar Sinha, the principal economist at the agency.

The agency has analysed the trends of the share of the unorganised sector in the overall economy and also the long-term trends in real gross value added of these units, sectoral composition of jobs and enterprises, and the estimate the economic and operational loss to the sector because of these shocks to arrive at these numbers.

The unorganised sector contributes over 44% to the GVA and employs nearly 75% of the work force employed in non-agricultural enterprises as of PLFS 2022-23. About 90% of the agriculture sector workforce comes under the ambit of the informal sector. A glance at the latest National Sample Survey data on the informal enterprises suggests their real GVA in FY23 stood at about `9.51 trillion.

“Though real GVA grew 6.9% YoY in FY23, it was still 1.6% lower than the levels attained in FY16. A long-term view at their real GVA gives a better picture of the deleterious impact of the shocks on the sector.”

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The New Indian Express